Green bandwagon thankfully not on agenda of the FX industry - FinanceFeeds

Green bandwagon thankfully not on agenda of the FX industry

Andrew Saks

Large FX brokerage denounces green derivatives as a folly, as we get the inside view. FX trading is about best pricing and fills, not pictures of otters and whales.

In recent times, there has been a culture within western government and private enterprise in which the copying of trendy fads has become almost the norm, most ranging from the banal to the absurd.

One such fad, which began over 25 years ago in many other sectors as a marketing trick in order to attempt to appear to be ‘caring’ and appeal to the bleeding hearts of potential new clients who may otherwise be alienated by the sharp-suited corporate positioning which made such companies great in the first place, is worthy of repudiation.

Tree hugging became ‘Corporate and Social Responsibility’, and therefore the subculture of soap dodgers became institutionalized. Cue the 1990s with its braided hair-sporting Human Resources officers and disclaimers on all printed circulars stating that the paper was made from reconstituted school meal waste, or other such nonsense.

Thankfully, the green marketing direction has been absent from the electronic trading business, until now. Many companies seeking to improve their image and demonstrate that they aren’t perceived as relics, throwbacks to the power-dressing era of the 1980s or that they are not profligate are now using the green agenda as a method of improving their commercial image.

There are even companies that have been established with buzzword-infused names that relate to ‘climate change’ – a buzz-phrase in itself, and are positioning themselves in the market purely to exhibit a green agenda. In November for example, FinanceFeeds reported that impact fintech business, iClima Earth, will launch the world’s first ESG UCITS exchange traded fund that provides exposure to companies offering products and services that enable CO2e avoidance solutions, and quantify that impact.

iClima Earth describes itself as a green fintech that creates investment products targeting companies that make impactful contributions to solving climate change.

The iClima Global Decarbonisation Enablers UCITS ETF (ticker: CLMA) will launch via the HANetf platform and will list on the London Stock Exchange in early December. CLMA will be the first ESG focused ETF issued by HANetf.

Would you invest in that? The silence is deafening.

Fringe companies run by hipsters with a marketing bent are not much to worry about, so the iClima Earth launch is as irrelevant as setting up a vegan table at an Argentinian asado. It matters not a jot.

What does matter is when the greenwash is aimed directly at the FX business, which is exactly what happened last week when FinanceFeeds noted that some major FX dealers have begun to foist ethical derivatives onto counterparties.

In Europe, including the United Kingdom which is home to the world’s largest and most important financial markets center, it is almost impossible to go about daily business without being apprehended and appalled by some hair-brained, extreme left notion from the collective governments of the region.

In Britain, it matters not which of the three main parties any member of public votes for, the outcome is that all are the same, differentiated only by the color of their suit, and all are inexorably socialist, inflicting constant lockdowns onto the nation which are decimating its economy and curtailing commercial freedom, forcing the majority of the workforce into unemployment which may well become permanent, and then hitting the nation with absurd green policies set to cost a fortune, when really all people want to do is earn a living which they are not allowed to do.

Germany, a notoriously socialist country, is going down the same route, this time with Deutsche Bank leading one of the most bizarre initiatives, that being to place an emphasis on green derivatives.

Users of deal contingent hedges may soon be able to link the derivatives to ethical targets, as banks consider launching trades with an environmental, social and governance (ESG) component.

“We should be doing them,” says Christopher Wall, global head of foreign exchange structuring at Deutsche Bank. “We will do them. When there’s client demand for a solution then banks will step up to the plate, so I’m already firing emails about it.”

Indeed, as are many interbank FX dealers as their management work tirelessly to try to appease the increasingly socialist policy makers in the Western world’s governments, including the US which is now about to embark on the same journey as parts of Western Europe have done with their lockdown obsessed anti-business wreakers of havoc and their illiberal ideologies which are full of obstacles to the free market and littered with irrelevant and expensive pet projects full of greenwash.

“There is no doubt that sustainable finance and environmental, social and governance (ESG) products are becoming increasingly important to policy-makers and financial market participants all around the world” heralded the International Swaps and Derivatives Association last month.

In September, ISDA hosted a virtual conference on ESG and derivatives, which highlighted the very important role the derivatives market has to play in the transition to a sustainable economy. One can only guess that these individuals are a barrel of laughs at a dinner party… and a vegetarian dinner party at that, likely attended by hemp-wearing, bicycle riding, bean-chomping vegetarians with a penchant for facial topiary.

The reality is that the financial markets business, and in particular the fast-moving electronic trading sector at Tier 1 interbank level and at centralized counterparty level (listed derivatives) is not about green agendas and appeasing left wing governments in irrelevant parts of Europe.

It is about free market capitalism, matching the best prices on major currencies whose moves are determined by the activities of business in their host nations. It is about analyzing the news, and capitalizing on corporate decisions in order to gain a higher price on company stock, and looking at the future value of derivatives in commodities, raw materials and predicting the performance of publicly listed corporations globally.

Nit-wits like lockdown-happy Boris Johnson and economic incompetents like Rishi Sunak whose inept government presides over the nation from which the vast majority of the world’s interbank dealing in the FX market takes place – Great Britain – are not the type of people who banks such as Deutsche Bank’s Canary Wharf-based electronic trading and prime brokerage division should be appeasing. Indeed, Mr Johnson has been forcing his own preposterous green agenda onto the public whilst ensuring they are locked away, not allowed to work, socialize or participate in a normal society.

Given this, what do our astute leaders in the FX industry make of any form of credibility with regard to moving toward offering ‘green’ derivatives?

FinanceFeeds spoke today to Natalia Zakharova, Business Development Manager at FXOpen, which has offices in several regions of the world and FX derivatives licenses with all of the major financial markets regulatory authorities.

“We do think that the recent surge in popularity of green instruments has a lot to do with the intention of attracting new target audience of a younger generation” said Ms Zakharova, echoing FinanceFeeds opinion that green initiatives are a triumph of marketing over substance.

“However, forex has been always associated with bigger players, who understand the risks yet willing to take them as well as volatility, speed and aggressive trading behavior” she continued.

“This green agenda might not go well with the new potential clientele, who are driven by different factors, at least for the moment. Therefore, I think that FX brokers should rather stick to the beauty of the forex market and what they do best – offering best pricing and fills possible in this highly interesting and volatile period” – Natalia Zakharova, Business Development Manager, FXOpen

Absolutely right. Trading the markets is not about fantasy or politics. It is not about false methods of playing on people’s feelings with imagery of puppies and blue oceans. It is about figures, accuracy, analytical skills and mastering fast-moving markets which at the moment are very volatile.

FX trading is, and always will be the survival of the fittest. It will always be mastered by those with a clear mind and an ability to act quickly in a considered manner. Ergo, not by those swayed by “awwww cute” imagery and dumbed down marketing exercises.

Carry on as you were, chaps.

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